TNAG-0627-FCO40-775-Effect-of-GATT-Multi-Fibre-Arrangement-on-Hong-Kong-negotiat-1977 — Page 99

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PERSONAL AND CONFIDENTIAL

HKGO.

31/5-

Foreign and Commonwealth Office

Sir Murray MacLehose GBE KCMG KCVO HONG KONG

London SW1A 2AH

32

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20 May 1977 du. Dully done

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MULTI-FIBRE ARRANGEMENT (MFA)

1.

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It is time I wrote to you to bring you up to date on the Community's deliberation over the MFA, with particular emphasis on how any new arrangements are likely to affect Hong Kong. Your people in London have been expressing some concern and have told us that there was considerable press interest in Hong Kong after the last meeting of the Foreign Affairs Council in Brussels on 3 May.

2. You will have gathered from the 7+ 7 meeting in Geneva on 5 May that the Community has still not reached agreement on its mandate to cover the remaining point of how to deal with cumulative market disruption. But agreement was certainly brought nearer by the discussion on 3 May, and it does look increasingly unlikely that the Community will be going for formal changes to the MFA to cover the cumulative disruption point. In other words, and will all due reservation, we do not believe that the Community will be seeking the negotiation of a globalisation clause in a revised MFA. This should make much easier the conclusion of negotiations in Geneva and give all parties concerned time to settle the trading arrangements for 1978 and later.

3. It looks as though the Community will be going for bilateral negotiations with its major supplying countries while, at the same time, taking an internal global view of Community imports of certain sensitive products. The Community's objective will be to keep the bilateral quotas agreed within that global figure. This approach should offer the Community adequate protection against the addition of an ever increasing number of new suppliers to a market, in the sensitive products, already hit by the large imports from the dominant suppliers, including Hong Kong. The remaining question, and the most important for you, is obviously how this approach will affect Hong Kong.

4. It is pretty clear that there will have to be some reduction in growth levels. I do not think it is reasonable or possible for the Community's industry to be expected to continue to stand current growth rates. That said, I do not think Hong Kong

PERSONAL AND CONFIDENTIAL

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